by using the scribble and texturize effects I came up with this result.http://img137.imageshack.us/img137/4590/68915484.pngI think it looks pretty good, except I want the stitching to stay in a 90 degree angel to the stroke on the corners and on the vertical sides of the rounded rectangle. any tips or workarounds?

Store the Appearance as a Graphic Style. Apply it to any path. Create the original grad using only grays, set the Colorization mode of the Pattern Brush to Hue Shift or Tints & Shades, and the one Brush will serve for any color "thread".

You can't use grad fills in a Brush. So, as the instructions indicate, you have to:

Object>Expand Appearance. (Flattens the live Scribble Effect.)

Object>Expand...>Fill. Specify Steps: 20. (Flattens the live Gradient Fill into a set of discrete paths with normal solid fills.)

PathFinder palette>Merge. (Unions adjacent areas of same color, and punches areas of overlap. This is just to further optimize the Brush by minimizing the number of paths.)

These steps are all mentioned in the demo, but are not as explicitly spelled-out, because the assumption is the reader has read the manual and is familiar with the basic features and commands, and would therefore understand the "shorthand" instructions.